SHANGHAI (AdAgeChina.com) -- PepsiCo is adding a musical twist to its usual product lineup of colas, sports drinks and potato chips with the launched of a music label in China in partnership with Qun Yin Culture and Entertainment.
Called QMusic, the label evolved out of a seven-month marketing promotion and contest, "Voice of the Next Generation," to find the best bands in the mainland.
Through the band search promotion, Pepsi "discovered that an unprecedented number of young people have joined together to form rock bands all over China. Creating QMusic to help this new talent find their voice was a natural evolution for our business," said Harry Hui, the Shanghai-based chief marketing officer, Greater China for Pepsi's beverages business unit.
"Pepsi has always been about the voice of the new generation and in China the new generation is shifting from a focus on 'me' to 'we'," he added. "The Pepsi proposition is simple: we are all about innovation, self-expression and creativity."
QMusic will represent contestants from Pepsi's "Band Battle" TV show, helping contestants become the next generation of music industry superstars--and Pepsi ambassadors.
The bands will become an integral part of Pepsi's future marketing. The music stars will write songs for the company, appear in Pepsi commercials, and their images will be placed on our products, said Chris Tung, a VP in Pepsi's beverage division in Shanghai.
"Band Battle" attracts 10 million weekly viewers
Six thousand bands across 122 cities participated in the televised "Band Battle" competition. The ten finalist bands now compete every Saturday at 9:30pm on China Blue TV, a channel distributed on cable and satellite networks around China.
The electric guitar-maker Fender Musical Instruments Corp. and Volkswagen Group have partnered with Pepsi to give guitars and Polo cars as prizes for the winners. One Polo car has been signed by celebrities and will be auctioned for a charity, Conservation International.
The program is the No. 2 show in its time slot, attracting more than 10 million viewers weekly. For online, there's a tie-up with Sina.com, one of China's top portals, and two video sites, PPLive.com and Youku.com. Music fans can watch the performances on television and view exclusive backstage footage online.
"We have three cameras filming backstage and three filming on stage at the same time," Mr. Hui said. "We now have consumers at home who watch the show on their laptop to see what's happening behind-the-scenes and watch on television to see what's happening in front of the camera."
Apart from the TV show, QMusic will seek more aspiring bands and singers to record, market and merchandise their music. The Chinese market is booming. China has more than 20,000 bands and the live concert and music festival industry is growing at 28% annually. In 2008, one million guitars were sold.
"Pepsi will act as more than a brand, more than a sponsor, but as a platform for China's hottest up-and-coming bands," said Tony Yapp, Hong Kong-based CEO of East Asia Music, Pepsi's joint venture partner in QMusic. "This is like Music Label 3.0. Label 1.0 just released CDs and left everything else to the artist. Label 2.0 handled the whole package, but the artists had to seek sponsorship. QMusic will provide the whole package, backed by a supportive and committed sponsor."
Music strategy traced to Harry Hui
Mr. Yapp is leading QMusic, but the company's origin can be traced back to Harry Hui.
Before he joined Pepsi in late 2006, the music and entertainment veteran spent five years as the Hong Kong-based president, Southeast Asia, of Vivendi's Universal Music. Mr. Hui led the company's aggressive digital-media strategy across Asia and created a popular music reality series in China called "My Show."
The series, which aired on Shanghai Media Group's Dragon TV channel, became the highest-rated program nationwide during Friday night prime time among 15-to-35- year-old consumers, according to ACNielsen.
The show was so popular that Mr. Hui, who was one of the judges, became a celebrity in China. (He's also one of the few business executives in China with a Facebook fan page.)
Before joining Universal Music, the Hong Kong native was executive VP and managing director, North Asia at Viacom's MTV Networks, responsible for China, Hong Kong, South Korea and Taiwan.
Combining marketing and music
Mr. Hui believes that Pepsi's new music label will "revolutionize" the way brands work with artists in China. The tighter integration he is creating between label, sponsor and artist will bring together music and marketing initiatives.
But private, brand-backed labels like QMusic could mean trouble for big global record labels like EMI, Warner Music and Universal Music, which are desperately trying to find a way to monetize music consumption in a market where free tracks are readily available on pirated discs and unauthorized download sites.
Losing faith that Asian consumers, including Chinese, will pay for music any time soon, global labels hope marketers will help cover the costs of nurturing and promoting new bands. That is happening, but marketers like Pepsi have the expertise to do this in-house, and online. QMusic will partner with A8 Digital Music Holdings, an integrated digital music company in China that will promote and monetize songs through digital platforms, including the popular ring-back tone format.
China has enormous growth potential
Going after the hippest segments of China's consumer culture is a longtime Pepsi strategy.
PepsiCo had a 32% share of the coarbonated beverages market by sales in 2008, behind Coca-Cola Co.'s 56% share, said Ailsa Gu, senior research analyst, Euromonitor International in Shanghai.
Pepsi has strong brand awareness among young consumers.
PepsiCo has seen "double-digit sales growth in carbonates in China, partly due to its emphasis on young people who tend to be less health-conscious. Therefore, the company has launched its own music label in China, to appeal to these target consumers better," Ms. Gu said. Pepsi's advertising also emphasizes youth, "usually through pop stars from Hong Kong, China and Taiwan, to help it remain connected to teenagers and young adults who are the main consumers of carbonates in China."
China, like other emerging markets such as India and Latin America, is a hot market for future growth, too. As soft drink consumption in China's first-tier cities reaches saturation, demand from inland and rural areas where consumption is still low is expected to grow for all marketers, Ms. Gu said.
Pepsi plans to invest $1 billion over the next four years in China, its second largest market by volume after the U.S., as part of the company's strategy to expand in emerging markets.
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